Public Capital and Economic Growth: Key Issues for Europe (original) (raw)

Do Public Capital Investments have an impact on Economic Growth ?

2020

In October 2019, the International Monetary Fund (IMF) trimmed its global growth expectation to 3.0% – the lowest since 2009 – down from 3.6% in 2018 (IMF, 2019a; 2019b). As global growth continues to slow amidst issues such as trade tensions and falling commodity prices, the need to identify key drivers of growth has intensified. In the search for these drivers, the benefits and importance of infrastructure may have been overlooked despite its strong potential to support higher economic growth as identified in several studies (Aschauer (1989, 2000); Calderón et al. (2004); Röller, L., & Waverman, L. (2001) etc.).

Public capital and aggregate growth in the United States: is public capital productive?

W, 1993

This paper deals with the empirical relationships between public capital and aggregate economic growth in the United States, allil in particular the question of whether or not public capital is productive. It develops a theoretical framework which allows for full consideration of feedback among variables without imposing a priori dynamic structural constraints. Parameter estimates are obtained through a V ARMA model. This approach departs from the current literature, which relies on a single equation approach to estimate production functions and implicitly assumes the absence of feedback relations.

Financing ‘New’ Public Investment And/Or Maintenance in Public Capital for Growth?

The ,paper ,revisits the ,relationship ,between ,growth ,and ,public ,productive expenditures,by investigating, the ,growth ,impact of ,‘new’ public ,investment ,along ,with maintenance,expenditures ,in public ,capital. We ,sketch ,out ,the ,importance ,of these components,of public ,capital expenditures ,for growth ,and ,we then ,use survey ,data from Canada,to assess,the impact,of these,variables on Canadian,growth. We find,evidence,that the Canadian ,economy ,would ,benefit from ,a fall ,in total ,public ,capital expenditures ,and from,a reallocation between,‘new’ public investment,and maintenance,expenditures. We also identify the growth,impact,of the associated sectoral public capital expenditures. Keywords:growth, public capital, maintenance cost, tax policy. JEL classification number:E22, E62, H21, H54. ,,,,,,,,,,,,

Public investment and economic growth in the European Union member states

2008

The issue of public investments became a very challenging subject for public decision makers since it incorporates the question of state performance, the quality of public finance and their effects on growth.The quality of public finance (QPF) is a multidimensional concept. It may be regarded as representing all the arrangements and operations regarding the financial politics that sustain the macroeconomic objectives, particularly the long#term economic growth. Financial policies at European level highlight the fact that a concentration of the public expenses in areas that stimulate the economic growth and a more efficient use of the public resources are key methods for sustaining the economic growth. The empirical proofs seem to support the assumption according to which certain types of public expenses can supply incentives and other can negatively influence the economic growth. The paper tries to reveal the effects of capital spending on economic growth (GDP per capita) for the European Union member states. The gross domestic product per capita and the capital expenses (functional classification of public expenses # "COFOG") have been obtained by considering the Eurostat statistics, the measurement unit for the dependent variable and for the independent one is the EURO, while the period of analyze is of 7 years (2000#2006)

Some Misconceptions about Public Investment Efficiency and Growth

IMF Working Papers, 2015

We reconsider the macroeconomic implications of public investment efficiency, defined as the ratio between the actual increment to public capital and the amount spent. We show that, in a simple and standard model, increases in public investment spending in inefficient countries do not have a lower impact on growth than in efficient countries, a result confirmed in a simple crosscountry regression. This apparently counter-intuitive result, which contrasts with Pritchett (2000) and recent policy analyses, follows directly from the standard assumption that the marginal product of public capital declines with the capital/output ratio. The implication is that efficiency and scarcity of public capital are likely to be inversely related across countries. It follows that both efficiency and the rate of return need to be considered together in assessing the impact of increases in investment, and blanket recommendations against increased public investment spending in inefficient countries need to be reconsidered. Changes in efficiency, in contrast, have direct and potentially powerful impacts on growth: "investing in investing" through structural reforms that increase efficiency, for example, can have very high rates of return.

On the interaction between public and private capital in economic growth

Journal of Economics, 2012

This paper examines two possible sources of interaction between private and public capital in an endogenous growth model with productive public investment, which is used as an input both in the production of final output and in the production of new public capital. On the one hand ,public investment and private capital are complementary with each other in the production of goods. On the other, they can be either complementary or substitutes in the production of new productive public capital .In our model private and public capital are two reproducible productive inputs interacting with each other in goods production and in productive public capital investment. The share of public capital devoted to output production can be exogenous or endogenous, and we consider a Cobb-Douglas and a more general CES aggregate production function. Our main results are that, when the share of public capital devoted to output production is exogenous along the balanced growth path equilibrium the common growth rate is a negative function of this share and a positive function of the degree of complementarity between the two forms of capital in infrastructure capital investment. When the sectoral allocation of productive public capital is endogenous, the main determinant of the economy's long run growth rate is, along with the model's preferences parameters, the public capital's share in GDP. Unlike existing literature (notably, Barro 1990), we find that the relationship linking the economy's growth rate and the public capital's share in GDP is U-shaped, rather than monotonically decreasing.